Despite a volatile week on Wall Street that included announcements of a possible Greek bailout and tightened Chinese monetary policy, investors continued to buy the dips in equities markets. Friday was an especially good example, with the indexes erasing large morning losses and the NASDAQ and S&P500 finishing positive on the day. The close in Friday’s session was especially interesting, as large amounts of buying came into all sectors of the markets.

Investors will be watching this week for a decision by the European Union as to how they will help Greece. Equity markets are closed on Monday in honor of President’s Day; however FOREX and Futures markets will be open. It is very possible that the markets to open Tuesday on a huge gap up or down relating to any news coming out of Greece.

This week also brings February options expiration week which should add more volatility to the markets. Many analysts have predicted that despite the volatility, markets will remain within a trading range. That range is the S&P would most likely be 1,040 to 1,080. The DOW Jones is hovering right around the important psychological level of 10,000.

Barring any unforeseen major events occurring, our market outlook remains mildly bullish. If the S&P can continue to scrap higher and close decisively above the 1,080 level, look for some serious short-covering to come into the markets, driving bids even higher. The short-interest buildup during the pullback that began two weeks ago may become the bear’s worst enemy over the next week.

If you took our advice and got long the Russell index after last week's newsletter, you would have caught a nice pop. The index bounced perfectly off the 200-day moving average two weeks ago. In last week’s newsletter we noted this and suggested getting long with a stop below the 200-day moving average. Since then, the Russell has experienced a strong 25 point run higher, closing at the 50-day moving average on Friday.

This week, our outlook is neutral to bearish on the index. The buying opportunity is now gone and a pullback will be necessary before an entry is advised. The strong dollar last week particularly helped the index. Look for sideways to down trading this week, which may set up the next buying opportunity.